Question

Suppose there is a decrease in the price of butter. What do we expect to happen to the demand for bread? Assume that bread and butter are often consumed together.

Select the correct answer below:

There will be a decrease in demand for bread.

There will be an increase in demand for bread.

There will be no change in the demand for bread and no movement along the demand curve.

There will be no change in the demand for bread, but there will be a movement up along the demand curve for bread.

Factors that increase supply include:

Select 2 answer that apply:

• lower taxes on the cost of goods

• an increase in the number of producers

• a rise in input costs

• changes in technology that increase firm costs without increasing productivity

In relation to supply and demand, what area of the graph does producer surplus occupy?

Select the correct answer below:

Above the demand curve but under the price.

Under the demand curve but above the price.

Above the supply curve but under the price.

Under the supply curve but above the price.

Answer 1

1.Bread and butter are complements.A decrease in the price of butter would lower the cost of consumption of bread and butter.Thus the demand for butter will rise.

Answer-Increase in demand for bread

2.Answer-lower taxes and increase in the number of producers.

These changes shifts the supply curve to the right.

3.Producer surplus is represented by area above the supply curve but below the price level.